Bombardier Transportation accused of corruption in South Korea

Posted:Jan 28, 2015

Bombardier Transportation was investigated in South Korea over corruption allegations but never charged, CBC’s French-language service Radio-Canada has learned.

A task force led by KoreanAi??prosecutors alleges that Bombardier, based in Quebec, offered gifts and trips to Canada for civil servants and politicians who decided to choose Bombardier’s technology for an elevated train system.

When the project was first announced almost 15 years ago, it was said to be worth more than $1Ai??billion.

Train with 1 car

(A note by Zwei: The Yongin line operate cars singly, yet Bombardier claims that the Yonguin ART could carry 25,000 ~ 30,000 persons per hour per direction, the same sort of nonsense his peddled here!)

The train system that began operating in 2013 is now a financial burden for the taxpayers ofAi??Yongin.

‘TheAi??YonginAi??train has only one car.’- HyunAi??Geun-Taek, lawyerYongin, the 12th biggest city in South Korea, has an impressive elevated train, which runs for 18 kilometreslinking the SeoulAi??subway system to a large amusement park named Everland.

The elevated train in South Korea, made up of a single car, will cost taxpayers about $3.5B over the next 30 years. (Radio-Canada)

The train is similar to Vancouver’sAi??SkyTrain but there is a major difference ai??i?? it only has a single car.”We thought it was going to be a metro, but the Yongin train has only one car, so we could say it’s more like a bus,” said Hyun Geun-Taek, a lawyer who filed legal action on behalf of the citizens of Yongin.

The “bus” is expected to cost taxpayers $3.5 billion over the next 30 years, including maintenance.

The city chose the elevated train, proposed by a consortium led by Bombardier, because a government agency predicted a ridership of 183,000 passengers a day.

That projection was exaggerated, according to a Yongin city councillor.

“[It's] a ridership so inflated, we can say it’s a joke,” saidAi??Yoo Jin-Sun.

It turned out the ridership prediction was way off. When the train entered service in 2013, there were fewer than 10,000 passengers a day.

Police probe for corruption

The public-private partnership between the city ofAi??Yongin and the consortium prompted prosecutors to launch an investigation.

A special investigation unit alleged that Bombardier offered gifts and trips to the civil servants who made the ridership forecasts and recommended the company’s technology.

“Between 2003 and 2005, Bombardier paid three trips to Canada to 37 people ai??i??Ai??flights in business class, luxury hotel, golf, sightseeing,” alleged Geun-Taek, adding that 18 Yongin city councillors also travelled to Canada for so-called “LRT [light rail transit] field trips,” courtesy of Ai??Bombardier.

The company has consistently denied the corruption allegations.

“They were not pleasure trips. There is a need to convince the people that our technology works well … If it had been corruption, they would have charged us,” said Serge Bisson, the vice-president of systems in northern Asia for Bombardier Transportation.

The prosecutors also alleged that Bombardier created a $2-million slush fund for an employee, Kim Hak-Pil, who is a high-ranking executive in South Korea and aAi??Canadian citizen.

Korean investigators suspected the slush fund money was used for lobbying civil servants and business partners onAi??other projects in South Korea.

“What I know is that we didn’t make illicit payments. We did not bribe anyone,” Bisson said.

A white elephant

No charges were laid at the end of the investigation due toAi??the statute of limitation according to prosecutors, while Bombardier said it was because there was a lack of evidence.

The city had to make drastic budget cuts in education and welfare programs, such as heating for seniors’ community centres.

“It’s a scam on the edge of legality. That’s what I think,” said Korea national assembly member Kim Min-Ki.

As the city of Yongin struggles to repay the debt associated with the train system, Bombardier is still making money. The company charges the city about $26 million a year in operation and management fees.

Bombardier has an operation and maintenance contract that can last 30 years.

Comments

“The prosecutors also alleged that Bombardier created a $2-million slush fund for an employee, Kim Hak-Pil, who is a high-ranking executive in South Korea and a Canadian citizen” I’m shocked, well not really.

What kind of slush fund does Bombardier have for Bob Paddon of TransLink, Mayor Gregor Robertson of Vancouver, Councillor Geoff Meggs of Vancouver, and the many other corrupt government employees in British Columbia? We can only speculate.

If the s-train is a financial burden to a Korean city with a real economy, what is the s-train in Vancouver with no real economy? How about a serious drain on the economy?

Obviously, the level of corruption with the s-train extends from federal level all the way down to the municipal level. What is needed is an investigation by the RCMP into the fleecing of taxpayers for concrete (sand) sellers to make money from condo builders buying concrete for concrete high rises along transit corridors and TransLink buying concrete for concrete guide-ways and subways for s-trains and subways.

TransLink is destroying the environment under the pretense that concrete dependent transit by TransLink is sustainable. Rubbish. I don’t see The Vancouver Sun exposing this.

I don’t see The Vancouver Sun making the inference into TransLink attempting to defraud taxpayers with another contract to SNC Lavalin and Bombardier to build another overpriced subway costing ~$5,000,000,000 over 13 km rather than the logical ~$60 million tram line. I am reading plenty of dire and disingenuous warnings of gloom and doom unless we fund TransLink further – even though over development along transit lines is the root cause of the growing road congestion on the roads and the root cause of the skyrocketing housing prices as a result of the loss of detached housing stock along transit corridors.

“They were not pleasure trips. There is a need to convince the people that our technology works well … If it had been corruption, they would have charged us,” said Serge Bisson, the vice-president of systems in northern Asia for Bombardier Transportation.” Uh, isn’t that what has already happened, Serge?

Stay tuned. I can’t wait for Ian Jarvis, chief of TransLink, to be cuffed and led away in an orange jump suit on CNN.

“As the city of Yongin struggles to repay the debt associated with the train system, Bombardier is still making money. The company charges the city about $26 million a year in operation and management fees.” Geez, just like in Vancouver!

VANCOUVER: When it comes to TransLink, it seems like the people expressing the most confidence in it are on the TransLink payroll, the No TransLink Tax campaign noted today.

In the past few days, local media reported glowing comments about TransLink from two out-of-town validators: Jarrett Walker and Jeffrey Tumlin. Missing from those reports was a key fact: both have cashed big cheques from TransLink.

Tumlin is the principal of Nelson Nygaard, a company that has been paid nearly $800,000 by TransLink in recent years:
2013: $235,722
2012: $362,580
2011: $112,455
2009: $75,290

Jarrett Walker & Associates lists TransLink as a client, and Walker’s LinkedIn notes he worked for TransLink for three years, including as an “in-house consultant.” Before that, he worked for Nelson Nygaard.

“TransLink seems to be the kind of organization that you have to get paid to love,” said Jordan Bateman, spokesperson for the No TransLink Tax campaign. “In this campaign, when you hear positive comments about TransLink and its leadership, it’s important to follow the money, as there may be a financial interest in seeing TransLink get more tax dollars.”

Interesting review of recent articles about Yongin on Daryls blog. It seems when the municipality was fighting the consortium in court they did not even bother to integrate the system with buses ect. Lo and behold ridership sucked….see the ridership numbers are unrealistic….after they lost the new mayor decided to actually use the line and it was integrated into the rest of the system. Strangely ridership has tripled and should pass the, ‘unrealistic’ projections shortly.

A clarfication, the 30,000 soon after opening number is from Daryls article (the actual projection). I don’t know where the 180,000 number quoted in the CBC stories is from, but assume it is some way in the future projection.

Zwei replies: I would think the CBC would be far more reliable than Daryl.

Daryl references his source, the CBC is quoting a number from an activist lawyer. I would assume that the activist lawyer’s projection is also correct but many years and maybe many extensions in the future (the lawyer just does not say). The official projection was for 30,000 per day 2 years after opening. Since they integrated the system it went from 10,000 to 30,000 per day in a very short time period. 30,000 per day still sucks, but I would assume the rapid growth phase of ridership growth is not over yet. Check back in 3 more years and see. According to the article quoted by Daryl break even on operation and maintenance is something like 70,000 per day, I would expect there is a good chance it will reach that number within 3 to 4 years.

Maybe you should actually read Daryl’s article before calling his sources (plural) tainted. It really does not take much time. I would think the Korean Herald and other sources would be a pretty reliable. And for the record it is only running one car but stations and the system are built for 2 car operation (which if you had read Daryl’s article you would know)…and for all I know there may also be additional expansions possible.

Zwei replies: I make it a habit not to read other transit blogs (it keeps me free from dubious libel lawsuits), simply because of their gross inaccuracies. You can read anywhere you wish and I wonder why you keep coming back here, especially if Daryl is the whiz kid. Imagine that, a 18 year old transit expert, without a degree. It’s laughable.

So many real transit experts read this blog and if there is a mistake, I very soon hear of it and it is corrected. The real issue, of course, is that no one cares about Vancouver, SkyTrain or our transit planning and maybe Daryl will deal with that.

After doing some research and talking to a friend from Bombardier I can now comfortably give my opinion on these events.

First thing I learned was that when Korea builds LRT projects they are actually referring to Light Metro’s.

2004, The Korea Transport Institute provides an estimate of daily ridership for the Everline Project that estimates between 150-183,000 passengers a day, the average expected to be 161,000. The over estimate was based on the belief that, 35-40,000 people would be living around the system’s 15 stations. As of early 2015, only 70% of the projects had even been started most of which were built at significantly lower density and occupation than originally planned. At best the current estimate of residents is 1/3 of the expected amount. It is increasingly likely that it may take 30-50 years to reach those initial population targets.

The problem for Bombardier and the City of Yongin is that, they signed off on those numbers and accepted these figures as accurate. It was clear as soon as construction started in 2006 that, the numbers were way off from reality. So right from the beginning the business case for this project is completely shot due to bad data.

2006-2007 The Korea Transport Database was created to help governments estimate the costs and benefits of Transport related infrastructure projects. Between 2008-2011 the City reran all the numbers for the entire project the new estimates showed that, 32,000 a day would be the new average ridership nowhere near the original daily passenger estimates. At 32,000 passengers a day the line is barely covering 52% of its operating costs of 29.5 Billion Won a year ($32 Million Canadian). The city has to cover the operating deficit. The agreement also stated that in 2018 5 new cars had to be purchased, over and above the original 30 cars. Even today they still only need 27 cars on a average day. The resulting passenger levels were going to be so low the City had to back out of that part of the contract. This cost to the City of Yongin, 29.6 Billion Won or $6.4 Million Canadian per car not built.

2009-2012 During testing technical problems appeared during line testing. Local inspectors found safety violations with the stations and trains and louder than expected noise generation from the test vehicles. The project flounders and although it is finished by 2010 (which Bombardier promised) it still has several outstanding unresolved technical issues. Bombardier sues the City in the International Court of Arbitration in Paris, due to the international nature of all the companies and cities involved. The city loses big and is forced to pay a 515.9 Billion Won settlement to Bombardier ($573 Million Canadian) almost 45% of its yearly operational budget. The Korean National government had to bail out the city which was now effectively, bankrupt. The Public Administration Ministry gave them 442 Billion Won and the City had to pay the remaining 73.9 Billion Won. A Korean law forbids local government to cut wages in this situations but nearly all of there bonuses and benefits were killed. The operational budget could only be slightly cut but its capital budget will be slashed for the 15 years or so. Only emergency repairs, most city programs to give increased capital or operational funding outside of basic operation to municipal functions was cut severely.

2013, The project officially opens its initial ridership is around 9421 passengers a day. The main problem was that its fare system was not integrated with Seoul Area’s Fare System. Since it was a private system operated by Bombardier it had negotiate with the area transit authority a fare deal. Bombardier had no interest in doing this. The lack of a free transfers to the area’s bus, subway and commuter rail systems as well as a higher cost fare when compared to the rest of Seoul’s local transport system only helped Bombardier in the short term. Finally under federal government order Bombardier was brought into the fare system.

Bombardier’s lack of interest regarding fare integration is understandable when you look at the details. In 2007 the Korean Government instituted a national fare policy that discounted the total fare every time you had to transfer. Since many cities like Seoul that have very large areas and very large area populations (20 million+ in this case) a individual rider could transfer as many 3,4 or 5 times before reaching their final destination. The great distance covered and the time it took by low wage earners to travel to work was so hard on the average earners that the government thought it should give the average guy a small break in traveling these long trips and discount the fare based on distance and number of times he or she transferred. This would cost Bombardier money in a big way so they initially refused to integrate their fair system. The Korean people however struck back hard, they didn’t ride the Everline. The final nail which forced Bombardier back to the table was that, the Korean government had instituted a program to put Bus Lanes on all of the Seoul Area’s Freeways. In 2008 the entire Gyeongbu Expressway had bus lanes installed and in 2009 through 2011 considerable sections of the Yeongdong Expressway has bus lanes added. This made the trip from the central and southern areas of Seoul by express buses along these lanes faster than taking the trains to the Everland Amusement Park. Until the fare system of the Everline was fully integrated it was also cheaper.

2015, It is believed that, even though the line now averages 31,000 passengers a day thanks to full system and fare integration, the competing transport systems (express buses and a planned rail line directly to the park itself from downtown Seoul) are forever going to hold back this lines ridership. It barely covers half of its operating costs and due to the City’s of Yongin desire to sue both Bombardier and the KTI, in Korean courts, over their initial 2004 ridership estimates (a condition/order of the Korean National Government when they got bailed out) the line will forever be trapped in a legal limbo held back from truly performing.

This is bad for Bombardier because now if anyone thinks about ordering their Skytrain technology rightly or wrongly will be faced with the information that a similar line in Korea effectively, if not actually bankrupted the city government of Yongin. This is not good if you are trying to sell this thing. Being a planner I can tell you anytime this technology gets hailed as a possibility for a rail transit line, some resident will pull out this story out and scream no way at the top of his or hers lungs. It doesn’t matter that, its not just Bombardier’s fault, a good number of local Koreans ignored the warning signs of this poorly managed project, this project wrecked a city’s finances for a very long time and that’s all anyone will remember. Its not fair but that’s life!

Slush funds aside, I hate to tell you most, if not all rail car producers, eventually get caught doing this at some point. It comes with the territory. I am not condoning it in anyway but when you are dealing with projects valued in the hundreds of millions or billions of dollars, a certain amount shady deals will happen. After the completion, no fewer than 25% of all Canadian road and highway projects show something illegal happened during the construction or planning stage. It is rarely caught because so many road projects seem to never have to have a business case applied to them during the planning phase or never get more than a quick going over, by the public. There seems to be no difference if the project private or publicly run or funded.

@Haveacow, is it over simplifying your email to sum it up as follows: s-train is not a stand alone transit system and unless “feeder buses” recycle (transfer) riders to the s-train line, ridership is abysmal? After witnessing the s-train debacle in Vancouver, this is my conclusion.

In short, the s-train stations are too far apart and unless small villages are built around the s-train stations (destroying the community) in the process, s-train can’t attract drives who are not interested in the slum transit and ridership projections are not met. I’d say, stick with trams and LRT at grade with stations no more than about 600 metres apart.

“Transit demand”
Transit demand (y) is dependent upon the housings density (x). Housing density is the independent variable, and transit demand is the dependent variable. Mathematically, y = c(x); where, c is some constant depending upon factors such as parking restrictions forcing some drivers to take transit. It is the City of Vancouver which determines the housing density and in turn the demand for transit.

Unfortunately, the number of drivers (z) is four times y. That is, z = 4(y). Whenever the housing density (x) is increased, the number of drivers (z) increases much more than the number of transit users (y). Therefore, when housing density is increased on transit corridors, transit can’t possibly reduce the number of cars on the roads. Increased transit service to accommodate increased housing density always leads to increased road congestion. For TransLink and the loons who TransLink has bribed to suggest otherwise is tantamount to fraud.

Incidentally, there is a disconnect in Vancouver with the City of Vancouver deciding the housing density and TransLink deciding the level of transit service. To correct this requires ridding Vancouver of TransLink for new and competent transportation staff at the City of Vancouver to select the right amount of transit for the planned housing density controlled by the City of Vancouver.

Any system, can be a stand alone system, in this case it seems the initial assumptions regarding many aspects of the Everline system were so far off the mark it placed the line in a continual situation were it is at a disadvantage. I have said before transfers (connections) are not necessarily a bad thing just as long as they are useful and easy. Buses can add ridership to any rapid transit line again, as long as the transfer to the rapid transit line is quick and easy.

Station spacing is difficult because for some it may take too long if you have a stop every say 600 metres. It depends on the length of the individual trip. Even in Europe, successful LRT lines that have too many stops too close together lose ridership however, those LRT lines can greatly reduce or eliminate the need for any parallel bus service. Stops 2km apart or greater, especially when the rapid transit line does not stick to a specific corridor (going cross country) will need parallel bus service and MAY be very reliant on transfers from other bus and or rapid transit lines. Now, I don’t think the Skytrain is a failure it does have a lot of ridership, especially in the North American context. I believe the technology is very limited in performance and in building cost as well as operating cost. This is because how its employed purposely limits its eventual potential in the North American or the European operating market. But just because the stops are far apart, doesn’t necessarily mean disaster for the Skytrain’s performance.

The relative demand for transit service varies greatly city to city. It depends on many things included expected transit service norms and even age factors are playing an increasing roll. Many young people are just not getting there driver’s license’s period and not just for economic reasons. This is being measured world wide and have auto companies panicked. Baby boomers may find in the very near future that they will be banned from driving, especially if Insurance Comaonies have their way. In Canada, 1 in 3 young people 18-24 have no licenses and this phenomina is growing not declining. The last demand model for transit I saw here in Ottawa had 48 different variables in it. The model for cities like Toronto and Montreal now have over a hundred variables. My takeaway is that, transit demand inside a given area is a complex thing that can’t be just quickly explained.

My point is that in Vancouver’s case, there are so very few potential places or corridors that could be new Skytrain lines. Right now, if there was no Broadway Corridor, there would be nothing even remotely close to needing this system. Even if they end up building the whole Broadway line to UBC there is nothing except small line extensions beyond that for now or in the near to intermediate future that would even be probable and or affordable.

Getting back to my point, the distance between stops are only problematic if it doesn’t match up with what the area’s residents needs are. The station stop or the relative frequency of stations/stops in my opinion is really a debate about the SCALE that the technology must operate in. The most common part of this is the distance or geographic scale that the average individual user needs. If you have to travel 15km or more, which is quite common in city regions with larger populations and large geographic areas. Having to stop every 600-800 metres in this context may not be for you, unless there is a transit alternative. Imagine if the Broadway line is fully built to UBC, how many people are going to get on the line at its eastern most stations and travel west, the entire distance to UBC every day before somebody finds that, you can get on the West Coast Express and travel to downtown a lot faster than if you take the Skytrain. At this point. you just take the Canada Line/Skytrain system the rest of the journey. I tried this while I was in Vancouver, it does save time if you are trying to go across town (assuming its the right time of day and West Coast Express is operating). I make the point that, once the Millennium Line is built to UBC it may be at its maximum distance scale that is useable for most of the area’s residents.

Toronto and Montreal found that you can only make Subway/Metro Lines longer if enough people are willing to travel the increased distance. In the case of the potential extension of the Yonge Subway line to Richmond Hill (one of the Lower tier municipalities of York Region) the line’s extension though positive in most cases, finds fewer and fewer riders the more northerly you go into Richmond Hill. The distance to Downtown Toronto or even Midtown Toronto(Yonge and Bloor) from the more northerly reaches of Richmond Hill greatly increases the travel time. Thus as Toronto’s suburbs grew further and further north transit designers found that an increasingly greater number of residents preferred GO Transit’s long distance Commuter Rail Trains (similar to your West Coast Express). Which by definition have stops much further apart than subways and service only a few major stops between northern Richmond Hill and downtown Toronto. The GO Regional Express Rail system now under construction is just an attempt to maximize the GO Train’s frequency and passenger capacity while still traveling the great distances more quickly than a subway line could (most Toronto Subway Lines have to stop every 800 to 2000 metres). GO Transit’s RER system will partially electrify 4 of the 7 current GO Commuter Rail Lines and greatly increase the frequency of service, but will still have 10-12 passenger car consists (depends on the line used).

Even those lines however, will have diesel service beyond the end of the electrified rail sections (for many reasons too numerous to mention here) that will act as through or express trains, not stopping on the electrified sections or at only major regional stations. Even GO train passengers have limits that they will endure in terms of the time it takes to travel to their final destinations. GO Transit has to virtual handstands to make these very long lines run on time and they greatly increase operating system stresses. This is were geographic scale limits technology. The current debate over potential GO Train or GO Bus service to the Niagara Region shows the limit geographic scale puts on travel time and the selection of an operating technology. What people in this region really need or want is quite controversial with good points on both sides. It didn’t help that, the Ontario government will spend only tiny amounts of money in this round of transit investment not greatly expanding GO service to the Niagara Region and its member lower tier municipalities. There are other parts of the scale debate like, capacity scale, building cost scale, operating cost and operating difficulty scale that can and do limit transit operating technologies.

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